In Trulia’s recent report, Rent vs. Buy: Roommate Edition, they examined the impact that renting with a roommate has in determining whether it is more expensive to rent or buy. The study explains:
“Since we started keeping track in 2012, it’s been a better deal to buy than rent in America’s largest housing markets – and for much of that time it hasn’t been close.”
It then goes on to ask the question:
“But does the equation change for renters who share their rent with a roommate?”
The report reveals:
“While the standard rent vs. buy analysis reveals buying is cheaper than renting in all of the nation’s 100 largest metros, this doesn’t hold true for those choosing between renting with a roommate and buying a starter home.”
It seems obvious that sharing the cost of renting your living space by taking in a roommate dramatically decreases your housing expense (which is exactly what the report concluded), but it got me thinking.
What if you purchased a home and took in that same roommate? What if you purchased a duplex and lived in one side and rented out the other?
The savings you would gain by adding a roommate would also occur if you purchased a home. This presents an opportunity for a list of possible purchasers. Here are two examples:
1. The first-time buyer: As the report explains, many young adults already live with a roommate. If they purchased a new home, perhaps that roommate (or someone else) would be willing to rent a room in their new house. The rent could help offset the mortgage payment.
2. The empty-nester seller looking to move: Their home may no longer fit their current lifestyle. They may now be looking for something a little smaller with all the bedrooms on the ground level. These families may be able to open a bedroom to an older family member (parents, aunts & uncles, etc.). This would kill two birds with one stone.
3. The first-time investor: Purchasing a duplex or other small multifamily home is a great way to affordably begin building an investment portfolio. Properties of four or fewer units where the owner lives in one of the units qualify for traditional mortgage products, including FHA loans. This form of “house hacking” is an increasingly popular way to add passive income to ofset the mortgage payment and build equity.
A smaller, move-down home is much more difficult to find in the current housing market. If the seller-turned-buyer takes on a tenant, they could buy a more expensive home knowing that the additional monies needed to pay the mortgage would be offset with the additional monies they receive in rent. Secondly, the older couple (ex. parents) could get a housing option that probably far surpasses anything else available to them in the current market. These points are true for the small multi-family home as well.
Considering the concept of renting a portion of your house to be able to purchase the perfect home may make sense to many families. You will need to decide if it is right for you.
You might also enjoy:
- How Accurate is Zillow?
- Your real estate success story
- Is it too easy to get a mortgage?
- 5 Tips for buying a home
Aaron Lovett is a full-service Realtor in Smyrna, TN, working out of the regional office of Century 21 United Realty in Murfreesboro, TN. His service area includes Smyrna, Murfreesboro, the remainder of Rutherford county and surrounding areas, including Nashville and Davidson county. He cares for the needs of sellers, buyers, and investors. Aaron has lived in the area for over a decade. He takes pride in helping home buyers and sellers reach their real estate goals.
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